nedbank group limited annual results 2017 · mfc home loans total retail clients investments...
TRANSCRIPT
RESULTS
NEDBANK GROUP LIMITED
2017
ANNUALar
FOR THE YEAR ENDED 31 DECEMBER
2NEDBANK GROUP LIMITED – Annual Results '17ar
Cyclical economic upturn off a low base
Prospects
Clients
– Increasing levels of consumer & business
confidence. Initial benefits likely in CIB & Wealth
Balance sheet
– Stronger wholesale & retail advances growth
– Liquidity metrics & capital levels to remain
strong
Income statement
– Revenue growth in 2018 higher than 2017
– Impairments to increase cyclically; & IFRS 9
impact
– Expenses continue to be well managed
Assets under management
– Good growth, particularly in cash & offshore
2017 2018 2019 2020
GDP SA 0.9% 1.6% 1.8% 2.4%
GDP SSA 2.4% 3.2% 3.5% 3.5%
Inflation (CPI) 5.3% 5.1% 5.5% 5.5%
Industry credit
growth5.0% 6.5% 7.9% 10.1%
Average prime
interest rate10.4% 10.3% 10.3% 10.7%
Macroeconomic drivers1 (%)
1 Assuming no local currency downgrade | All Nedbank economic unit forecasts as
at 15 February 2018 | GDP SSA as per World Bank.
3NEDBANK GROUP LIMITED – Annual Results '17ar
Listing of Old Mutual Limited
(OML)
Old Mutual managed separation
Business as usual for Nedbank
− No impact on strategy, day-to-day management or operations, nor on staff or clients
− Technology, brand & businesses have not been integrated
− Engagements have been at arm’s length – overseen by independent board structures
− No impact on ongoing OM collaboration in SA & Rest of Africa. > R1bn synergies achieved in 2017 (R393m to Nedbank)
UnbundlingAllow OML shareholder base to transition to an SA & EM investor base
At the earliest
opportunity in 2018,
following OM plc’s
2017 full-year results
announcement
Unbundling of Nedbank Group
ordinary shares to OML
shareholders – approximately 6
months after listing OML
OML retaining a strategic
minority shareholding1 of 19.9%
in Nedbank Group (underpins
the ongoing commercial
relationship)
Sufficient time for OML’s
shareholder register to
transition to an SA & EM
focused & mandated
investor base
Exit of non-EM
shareholders
Nedbank Group shareholding post
unbundling
Increased index
weightings (free-float
from ~45% to ~80%)
Normalisation of SA
shareholding (mostly
underweight given
holding via OM)
‘Independent’ Nedbank
attractive for SA &
international investors
1 Calculated as OML shareholder funds divided by the total Nedbank Group ordinary shares in issue
4NEDBANK GROUP LIMITED – Annual Results '17ar
Delivering value to shareholders
13
143
14
395
15
685
15
830
16
990
13 14 15 16 17
895
1028
1107
1200
1285
13 14 15 16 17
17.2 17.2 17.0
16.5 16.4
13.013.5
13.0
14.2 14.0
16.8
18.1 18.1
13 14 15 16 17
ROE (excl GW)
COE
ROE (excl GW & ETI)
+7.3% +7.1%
NAV per share (cents) ROE & cost of equity (%) Dividend per share (cents)
CAGR: +6.6% CAGR: +9.5%
5NEDBANK GROUP LIMITED – Annual Results '17ar
Key performance indicators – good performance from managed operations
2017 2016 2017¹ 2016¹
Headline earnings (Rm) 2.8% 11 787 11 465 7.8% 12 762 11 839
ROE (excl goodwill) 16.4% 16.5% 18.1% 18.1%
Diluted HEPS growth 2.4% 4.8% 7.3% 15.1%
Preprovisioning operating profit growth (3.2%) 4.4% (0.3%) 10.0%
Net interest margin2 3.62% 3.54%
Credit loss ratio 0.49% 0.68%
CET1 CAR 12.6% 12.1%
Dividend per share (cents) 7.1% 1 285 1 200
Managed operations
1 Excluding ETI associate income/losses, as well as ETI-related funding costs. Managed operations reporting provided to assist in analysis of group performance during the
period of ETI Q4 2015/16 losses, but we will revert to blended results in 2019. 2 2016 rebased.
6NEDBANK GROUP LIMITED – Annual Results '17ar
Good performance from our managed operations – group headline
earnings up 2.8%
6014
4960
1192
(287
)
(414)
6315
5302
1068
(810)
(88)
CIB RBB Wealth Rest ofAfrica
Centre
16 17
+5.0%
+6.9%
(10.4%)
Earnings contribution (Rm)Headline earnings (Rm)
54%
45%
9%
1%
(8%) (1%)
CIB RBB
Wealth Rest of Africa
ETI Centre
7NEDBANK GROUP LIMITED – Annual Results '17ar
Headline earnings – good performance from managed operations
11 465 11 787
1 198 560
1 250 (1 446)
(733)
(507)
2016 NII NIR Impairments Expenses Associateincome
Direct tax& other
2017
+4.5% (27.4%)+2.4% +5.1% (> 100.0%)
2.8
7.8
Group Managedoperations
16.418.1
Group Managedoperations
Headline earnings (Rm) HE growth (%)
ROE excl GW (%)
8NEDBANK GROUP LIMITED – Annual Results '17ar
Headline earnings – improved H2 2017 performance from both managed
operations & ETI
H1 2017 vs H2 2017 (Rm)
13
028
13
398
13
548
14
076
H1 H2
NII
11
357
12
146
11
730
12
333
H1 H2
NIR
2211
2343
1594
1710
H1 H2
Impairments
13
686
14
680
14
369
15
443
H1 H2
Expenses
6030
5809
6433
6329
H1 H2
HE managed operations
(431) 326
(1 0
53)
215
H1 H2
Associate income
+4.0% +5.1%
+3.3%+1.5%
(27.9%) (27.0%)
+5.0% +5.2%
+6.7% +9.0%
(144%) (34%)
16 17 ETI: (446) (1061) 321 317
9NEDBANK GROUP LIMITED – Annual Results '17ar
Net interest margin – driven by endowment & asset mix
Net interest margin (bps)
Average interest-earning banking assets1: +2.2%
341 354
362
135
8 (2) (2) (2) 1
2016 Removal oftrading LAP
2016rebased
Endowmentimpact
Assetmix
Assetpricing
Liabilitypricing& mix
Prime-JIBARimpact
Other 2017
1 Rebased NIM for twelve months ended 31 December 2016 would have been 354 bps & AIEBA of R745bn, had HQLA been removed from the banking book & included in the
trading book from 1 January 2016.
10NEDBANK GROUP LIMITED – Annual Results '17ar
152
162
121
145
106 1
9
15
162
148
114
150
112 2
0
16
Commercialproperty
Termloans
Otherloans
Homeloans
Vehiclefinance
Personalloans
Card
Dec 16 Dec 17
21
Selective origination
& unique positioning
Gross advances (Rbn)
Mostly
ST &
volatile
Wholesale
Advances up 0.5% – solid growth & market share gains across retail
portfolios offset by early repayments in CIB
BA900 market share3 (%)
+6.5%+3.2%
(8.3%)
(5.2%)+6.3%
+4.1% +6.3%
Leveraging
relationships &
pipeline
Retail
1 Terms loans & other longer-dated loans. | 2 Other loans include overdrafts, overnight loans, preference shares, deposits placed under reverse repurchase agreements & other smaller
corporate loans. | 3 BA900 – Dec 2017 (Compared to Dec 2016). | 4 Core corporate loans comprise commercial mortgages, corporate overdrafts, corporate credit cards, corporate instalment
credit, foreign sector loans, public sector loans, preference shares, factoring accounts & other corporate loans (other loans and advances excluding household personal loans). | 5 VAF per
BA 900 comprises total lease & Instalment sales.
Share Trend
Commercial
property40.5 (0.3)
Core corporate4 21.0 (1.3)
Home loans 14.5 0.0
Vehicle finance5 28.1 +0.4
Personal loans 10.3 +0.1
Card 14.0 +0.3
11NEDBANK GROUP LIMITED – Annual Results '17ar
BA900 market share1Deposits (Rbn)
Deposits up 1.3% – good household deposit growth, particularly in RBB,
up 8.5%, evident in ongoing market share gains
Share Trend
Wholesale 21.2 (1.1)
Corporate
(non-financial)16.5 +0.2
Household 18.9 +0.2
Foreign
currency 12.8 +0.2
1 BA900 – Dec 2017 (Compared to Dec 2016).
761
772
23
2 1 (4)
(11)
2016 RBB Wealth Rest ofAfrica
CIB CentralMgnt
2017
+8.5% +4.8% +4.2% (1,3%) (13,3%)
Basel III + Basel III -
12NEDBANK GROUP LIMITED – Annual Results '17ar
17 355
3 900
1 566
708
534
Commission& fees
Tradingincome
Insuranceincome
Privateequity
Other¹
Non-interest revenue up 2.4% – resilient underlying performance, offset by high
base, the impact of a challenging economic environment & weak insurance result
NIR growth per cluster (%)Non-interest revenue (Rm)
1 Represents sundry income, investment income & fair-value adjustments. | 2 C&F 72% of NIR.
Rest of Africa & Centre excluded as not material.
CIB RBB Wealth
16 17 16 17 16 17
14.5 (3.9) 6.9 5.0 (5.1) (0.6)
▲2.3
▼(24.1)
▼(4.5)
▼(10.0)
▲18.9
▲3.1
▲16.4
▼(4.3)
▲7.1
▲5.32
13NEDBANK GROUP LIMITED – Annual Results '17ar
3 713 4 019 4 184
1 385 1 430 1 616
4 223 4 566
4 737
15 16 17
Retail transactional NIR growth ahead of client growth – deeper
client penetration
Total retail client base (#000) Retail NIR (Rm)
4 377 4 633 4 755
2 703 2 784 2 783
15 16 17
Retail excl
main-
banked
Total7 5387 417
7 080
+4.8%
+3.0%
0.0%
Main-
banked
+1.6%
Transactional
Other
Total
10 0159 321
+5.2%
+7.4%
+6.0%
+6.9%
10 537
Consumer
card issuing
14NEDBANK GROUP LIMITED – Annual Results '17ar
Client-centred strategy intact but measure impacted by the
macro environment
Main-banked, # 000K
ids &
youth
Entr
y level
Mid
dle
Pro
fessio
nal
Sm
all
Bu
sin
ess
Busin
ess
Bankin
g1
1 Client groups with gross operating income contributions in excess of R500 pm.
Note: Non-resident, non-individual segment not shown.
15 16 17
739 786 797
+6% +1%
1615
107
17
101 113
+6% +6%
7066 68
+4% +3%
382407 410
+1% (7%)
22,2 22,3 22,4
0% +1%
1 404 1 4111 381
+2% +1%
15NEDBANK GROUP LIMITED – Annual Results '17ar
Good growth in consistently active main banked clients
Total retail
clients
Transactional
clients1
Active
clients2
Main-banked
clients
Retail client base breakdown (#m)
Consistently
active
clients3
2.8
6.0
7.5
3.7
1.8
16 17
YOY% Growth
+1.6%
+1.7%
(3.2%)
0.0%
+4.2%
1 Clients with a transactional product. | 2 Active clients within the last 6 months. | 3 Main-banked for each of the past 12 months.
Definition of main-banked clients: Youth & ELB ≥ 3 debits, 1 credit ; Middle market ≥ 6 debits, 1 credit ; Professionals ≥ 12 debits, 1 credit ; SBS ≥ 25 debits ; All over 3-month period.
8.8%9.6%
10.1%
12.7%
13 1714 1615
Nedbank main-banked market share (%)
AMPS
Consulta
Same question asked:
‘Which ONE bank do you regard as your main bank for personal
banking?’
AMPS
discontinued
16NEDBANK GROUP LIMITED – Annual Results '17ar
More enduring client relationships through transactional product cross-sell
+1.2
Card
Personal Loans
MFC
Home Loans
Total Retail clients
Investments
Transactional
product
2.2
7.1
4.9
(6.4)
(2.0)
1.7
% YOY growth# 000
Transactional clients with product line
72%74%
57% 58%
51% 54%
24% 24%
40%38%
27%
Dec 17Dec 16
27%
Number of product line clients
with transactional products
1 432
478
1 534
560
939
985
448
573
306
300
6 026
5 925
% YOY growth
+0.1
(1.4)
+1.8
+3.2
+0.7
Dec 16 Dec 17
17NEDBANK GROUP LIMITED – Annual Results '17ar
Credit loss ratio – improvement underpinned by a quality portfolio &
proactive risk management
47.3% 45.5% 4.3% 2.9%Banking
advances
106
79 77
68
49
13 14 15 16 17
34
112
8
98
6
106
9
102
CIB RBB Wealth RoA
16 17
1
Group CLR1 (bps) Cluster CLR (bps)
1 Nedbank through-the-cycle target range: 60–100 bps.
18NEDBANK GROUP LIMITED – Annual Results '17ar
36.0%
1.2%
4.4%
3.7%
2.0%
4.4%
32.5%
1.0%
3.8%
4.0%
1.3%
4.2%
PropertyFinance
Construction
Equity
Mining
Retailers
StateOwnedEntities
16 17
CIB – proactive risk management in prior periods yielding results
CIB CLR (%)
CIB coverage ratios (%)
23.627.7
17.1
26.3
21.0
0.21 0.24 0.29 0.290.45
13 14 15 16 17
Portfolio Specific
CIB selected sector exposures (%)
Migration
riskDown-
side risk
Change
H
H
M
L
M
L
H
-
-
-
H M -
M M -
M ▲
1 State Owned Entities restated to exclude direct Government related entities
1
[ ] Risk decrease [ ] No change [ ] Risk increase
Change on prior period:
▼ - ▲
0.30
0.19
0.40 0.34
0.06
13 14 15 16 17
19NEDBANK GROUP LIMITED – Annual Results '17ar
47% 46% 47%45%
42%
13 14 15 16 17
Quality commercial property book
Diversified book by property type (%)
Low average loan-to-value (LTV) (%)
22
22
12
11
5
9
2
34
10
Offices
Retailers
Warehouse
Multiple portfolios
Manufacturing
Residential
Vacant land
Hotel & BB
Other mortgages
Other loans
Key drivers
Strong client base supported by an experienced team
Lending access to existing collateral pools
Vacant land < 3% & Residential < 10% of portfolio
Retail centre developments funded on > 70% pre-lets
One third of book lending into listed property funds
Primary lending operation supplemented by private equity arm
CLR (%)
: LTVs >90%119.4% 4.6% 3.0% 2.5%17.5%
0.27
0.21
0.08 0.04
(0.05)
13 14 15 16 171 Excludes unsecured loans to listed REITS – by regulation these REITS have gearing ratios of less than 60%.
20NEDBANK GROUP LIMITED – Annual Results '17ar
Personal loans well positioned from a credit risk & regulatory
perspective
Product & policy
summaryNedbank Market1
Maximum term
(months)60 84
Minimum term
(months)12 1
Maximum loan
amount250k 350k
Restructuring policy
Debt
counselling
only
Yes
Readvances to
clients in arrearsNo Unknown
Nedbank practices
Recent growth primarily in low & low-to-medium
risk categories
Current term offering more conservative than the
industry (no pay-day loans)
Maximum loan below industry, but increased to
R250k for best-risk customers only
Do not restructure accounts other than those
accounts in debt counselling (DC)
Do not settle internal loans in arrears or who
have previously been restructured with a re-
advance
1 Based on market information as available; includes traditional four banks & material providers of personal loans. It reflects the maximum or minimum available from 1 or more market competitors
21NEDBANK GROUP LIMITED – Annual Results '17ar
RBB – CLR underpinned by quality origination
Nedbank Competitors1 Source: Experian Delphi Score2 Source: Lightstone Risk Quality Grade3 Source: Experian
HL new business – low risk clients proportion1 (%)
HL new business – low risk properties proportion² (%)
0%
10%
20%
30%
40%
09 10 11 12 13 14 15 16 17
0%
10%
20%
30%
40%
09 10 11 12 13 14 15 16 17
PL market share of new business by risk band3 (%)
0%
5%
10%
15%
20%
14 15 16 17
Low Risk * Low-Medium Risk Medium Risk High risk
Nedbank Tier 1 ** Tier 2 **
0%
20%
40%
60%
80%
14 15 16 170%
20%
40%
60%
80%
1714 15 16
Vehicle finance 3 months+ arrears benchmarking3
0%
1%
2%
3%
4%
5%
6%
13 14 15 16 17
* Low risk (Bureau score ≥ 658); Low−medium risk (Bureau score 644−657); Medium risk (Bureau score 626−643); High risk (Bureau score ≤ 625)
** Tier 1 refers to traditional 4 banks excluding Nedbank while tier 2 refers to remaining material providers of unsecured personal loans
22NEDBANK GROUP LIMITED – Annual Results '17ar
28 366 28 850
29 812
1 105 (621) 617 107 238
2016 BAUgrowth
Efficiencies BAUgrowth
Investments Regulatory BancoÚnico
2017
Expenses – good cost management in response to slowing revenue
growth
Expenses (Rm)
1 R621m includes TOM, OM synergies & other cost savings. R444m accrues to RBB2 Investments, including IT projects, branch reformatting costs, etc.
+1.7% +3.4%
21
23NEDBANK GROUP LIMITED – Annual Results '17ar
R238m run-rate savings in
2017, include:
Optimisation of branch
footprint
− reduction in floor space
− closed 53 PL & 32
inretailer outlets
Self-service banking
Sales & service integration
Headcount reduction
Expenses – various initiatives in place to support meeting our efficiency
ratio target of < 53% by 2020
Adoption of automation &
robotics
Procurement benefits from
SAP implementation – eg live
auctions
Managed evolution of core IT
systems – decommissioned
122 since 2010 (16 in 2017)
(target < 60 by 2020)
Headcount reduction
1 Target Operating Model initiatives enable Nedbank to operate with greater agility, leading to revenue & cost savings benefits
Old Mutual synergies
(costs & revenues)
Nedbank >30% of R1bn by 2017
Target &
completion
date:
Target Operating Model1
(costs & revenues)
R1.0bn by 2019 & R1.2bn by 2020
Other ongoing
cost savings
Ongoing
Delivered > R1bn pretax
synergies with Old Mutual,
of which R393m accrued to
Nedbank. Synergies
include:
− IT collaboration to
achieve scale
− Joint procurement
savings
− Wholesale banking
revenue initiatives
24NEDBANK GROUP LIMITED – Annual Results '17ar
Accelerated digitisation of technology & operations
Change in 2017Deposit volumes (# 000)
48%
2015
23%
2017
34%
2016
27 81829 594 29 256
+3%
Traditional deposits Self-service deposits
>100%
(5%)
30%
Launched 2017
21%
38%
18%
(13%)
130k
39%
Digital clients1 (# 000)
5 784
Enabled
5 3442
3 354
+31%
Dec’15 Dec’17Dec’16
891
Active
788852
+6%
Devices
Intelligent Depositors
ATMs
Video bankers
Self-service kiosks
Interactive tellers
Volumes
Digital volumes
Total App usage
Money App registrations
ID deposits
Teller activity
1 Digitally enabled & active clients have been restated to include all digital channels & to allow for only last 90 days of recent activity.2 Growth largely as a result of the Digital Activation Programme run in Q4 2016.
25NEDBANK GROUP LIMITED – Annual Results '17ar
Floor space saved
(m2)
639 593
453391
277
171
255304
336
10 14 15 16 17
Traditional New-image
Integrated channels – efficient use of space & staff,
optimising branch footprint
10 14 15 16 17
Outlets format mix
(#)
Total & new-image outlets
(#)
13 695
18 743
764708 695
7 273
Cumulative target >30 000 m2
by 2020
639
452 500 504 507 512
4371 55 40 0
144
193149 148
101
10 14 15 16 17
Branches Personal Loans
Inretailers
764708 695
63924 485613 613
26NEDBANK GROUP LIMITED – Annual Results '17ar
1.0 1.01.2
1.7
2.3
13 14 15 16 17 18 19 20
IT cashflow spend (Rbn)
Investing in technology to enhance client experiences &
unlock efficiencies
Capitalised IT costs (Rbn)
Projected to peak as regulatory
projects complete & development
costs on new technologies reduce
1.62.4
1.3
1.21.0
1.20.3
0.7
0.4
0.5
16 17Digital
Payments
Support
Core product & client
Development costs
4.6
6.0
Developing new
technologies
with longer
lifespans (longer
amortisation
periods)
Increasing
investment in
digital channels &
payments
194176
166
145129
< 60
13 14 15 16 17 20target
Core systems (#)
Rationalise, standardise & simplify
Digital includes client onboarding & servicing eg. various
apps & web enablement.
Payments include Authenticated collections & payment
switch.
Support includes core foundation programmes: SAP ERP, IT
security, Enterprise Data & IFRS 9 (credit modelling).
Core product & client include Flexcube (RoA), IB loan mgnt
(CIB), Client CIS & AML.
Compliance related
27NEDBANK GROUP LIMITED – Annual Results '17ar
148278 292
152
(676)
230 171 150
(1 203)
142 152 16542
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Associate income – ETI performance reflective of tough but improving
environment, particularly in Nigeria
Associate income from ETI1 (Rm)
870 (125) (744)
1 ETI accounted for one quarter in arrear. | 2 Estimated Q1 2018 average exchange rate: R/ $ 11.97 | 3 Source: ETI disclosures. ETI reported COE at ~ 17%.
15 16 17
ETI medium-to-long
term guidance3
ROTE target: COE + 5%
(H1 2017: 15.3%)
Efficiency ratio: 50−55%
(H1 2017: 60.6%)
18
2
28NEDBANK GROUP LIMITED – Annual Results '17ar
ETI – Steady progress on a recovery path for 2017
Macroeconomic environment improving Progress in strategic turnaround led by ETI board
Changes to the board composition & MIS representation on various board subcommittees
Strengthened ETI management team
Conclusion of the US $400m convertible bond issue in September 2017
Financial turnaround, as reflected by:
− Audited H1 2017 results
− Solid Q3 2017 performance
− ETI management guidance for FY 2017
Increasing levels of collaboration between Nedbank & ETI
1 IMF forecasts
7.7
3.5
(1.6)
6.7 6.8
0.8
6.67.7
2.2
Côte d'Ivoire Ghana Nigeria
GDP growth forecasts1
17 18
Key ETI markets
16
29NEDBANK GROUP LIMITED – Annual Results '17ar
Nedbank – Ecobank collaboration – integrated crossborder transfer
solution (initially outbound only)
African migrants
2.7m
Market size: Remittance
value SA – Rest of Africa
R14−19bn
Through mobile/digital
channels internationally
25%
Through international cash
transfers
60%
Through traditional banking
channels internationally
5%
Access & distributionOpportunity Differentiation 1
Lowest cost to client in the
industry (no third parties)
Cheap
Instant cross border transfer
– subject to regulatory &
compliance checks (other
solutions 10 min to 2 days)
Quick
Usage across all channels
– initially account to account,
mobile app & website.
Moving to wallet, USSD,
ATM, branches, etc
Available in 33 countries
24 hours – initially business
operating hours, moving to
24/7
Easy
1 Key competing products include Mukuru, hello (PAISA), Western Union (BGA), MoneyGram (FNB & Standard Bank)
30NEDBANK GROUP LIMITED – Annual Results '17ar
12.1
13.0 12.6
12.6
2.1(1.2) (0.4)
Dec2016
Organicprofits
Dividendspaid
RWA increases
Dec2017
Capital – CET1 above the top end of our target range
CET1 capital ratio (%)
CET1: 10.5–12.5%
SARB minimum CET1: 7.25%
CET1 & estimated IFRS impact (%)
11.8 >12.4 12.8
BGA(normalised)
FSR (postAldermore)
NED SBK
Estimated IFRS 9 impact Estimated CET1 post IFRS 9
12.1 12.012.6
13.5
1
1 No guidance provided by FSR yet on impact of IFRS 9
31NEDBANK GROUP LIMITED – Annual Results '17ar
IFRS 9 & 15 accounting standard day 1 impact1 – strengthened balance
sheet coverage with immaterial impact on CET1
66.4~ 65.7
~ 3.2
2.0~ 0.9 ~ 0.2 ~ 0.2
31 Dec 2017 IFRS 9Impairments
Excess ofdownturn ECLover provisions
Tax effect
IFRS 9Classification &measurement
IFRS 15Revenue
1 Jan 2018proforma
Common equity tier 1 (Rbn)
Portfolio coverage:
CET1:
0.70% ~1.05%
12.6% >12.4%< 0.1%
~ 0.35%
2
< 0.1%
1 These estimates are based on accounting policies, assumptions, judgements & estimation techniques that will be regularly reviewed & assessed during 2018. | 2 Excess downturn expected
credit loss over provisions reversed due to increase in IFRS provisions. | Excludes ETI IFRS 9 impacts to be announced in H1 2018.
32NEDBANK GROUP LIMITED – Annual Results '17ar
Dividend – dividend cover within our target range
2.11 2.07 2.062.00
1.91
13 14 15 16 17
Board-approved target range:
1.75 – 2.25x
Dividend cover (times) Dividend yield (%)
Payout
ratio: 47% 48% 48% 50% 52%
3.9
4.8
2.7 2.8
13 14 15 16 17
Nedbank JSE all-share index
33NEDBANK GROUP LIMITED – Annual Results '17ar
Strategic focus areas – enhancing client experiences & efficiency through
digital innovation is a key focus for 2018
Delivering innovative market-leading client experiences
Growing our transactional
banking franchise faster
than the market
Being
operationally excellent
in all we do
Managing scarce resources
to optimise economic
outcomes
Providing our clients with
access to the best financial
services network in Africa
Delivered in 2017 … … launching in 2018
Managed Evolution – rationalise, simplify & standardise
core systems (reduced by 122, < 60 by 2020)
Digital Fast Lane & New Ways of Work – more client-
focused, competitive, digital & agile
New apps – Nedbank Private Wealth (rated 6th globally),
Nedbank Money, Karri (school payments)
Channels – NZone (self-service digital branch), Solar
Turtle (deep-rural solar-powered branch), Intelligent
Depositors, video banking
Business optimisation – Executive EySightTM, Robotic
Process Automation (50 software robots)
Pilots – Chatbots, robo-advisors, Blockchain
Platforms – UNLOCKED.ME (millennial market place),
Refreshed Nedbank internet banking platform
Simplified client onboarding – convenient, FICA-
compliant account opening from your couch
Ability to sell an unsecured loan bundled with a
transactional account
New Loyalty & reward programme
Geyser telemetry – reduce electricity usage
Stokvel – a community savings solution
Further rollout of software robots, artificial intelligence,
robo-advisors, chatbots
Integration with ETI remittance app to reach 2.7m people
34NEDBANK GROUP LIMITED – Annual Results '17ar
Delivering innovative market-leading client experiences
Executive EySightTM
Real-time client & management
information insight
Robotics Process Automation
Improve efficiencies, accuracy
& quality of work
Technology
Enhancing client experiences
Client
Intelligence
Platform
Executive
EySightTM
First implementations delivering benefits Implementations | Pilots
Cross-sell & client servicing benefits
135 processes identified
Potential cost-savings in man hours
Insight into client cross-or up-sell
opportunities
Continuous enhancements leading to
management insights & predictive
analytics
Implementation of systems to enhance client experience
Continuous testing of disruptive technologies to improve the way we do business
35NEDBANK GROUP LIMITED – Annual Results '17ar
Delivering innovative market-leading client experiences
UNLOCKED.ME
Innovative lifestyle e-commerce platform
Banking’s first
UNLOCKED.ME brings together three pillars, It is a
platform which will allow you to unlock your lifestyle,
your potential and your money.
It is full of unique experiences, sure to thrill our youth
target audience. It is our first lifestyle market place,
designed with our clients in mind.
Payment solutions
Winning in digital
Worldclass banking apps
The Nedbank Money app features user-centred
design for basic banking with self service
capabilities.
The Karri App is an integrated, mobile payment
solution, to reduce the handling of cash at
schools
Digital branch
SA’s first digital branch
– entirely self-service
Leading in digital outlets
Launched at Gautrain Sandton Station (Sept ‘17)
Technology available: Intelligent Depositor, video
banking, quick-chat banking, self service kiosk,
virtual reality, grab-and-learn wall, interactive demo
station, facial recognition
36NEDBANK GROUP LIMITED – Annual Results '17ar
Delivering innovative market-leading client experiences
Chatbot, robo-advisor &
geyser telemetry
Developing innovative solutions
Systems & processes
Digitising business processes
Unique in marketStraight through
processing
Nedbank Private Wealth app
Best-in-class client experience
& full financial suite of digital services
Rated one of the best HNW apps globally
1 Rated 6th out of 34 apps globally in the Mobile Apps for Wealth Management 2017 survey
Reduced
paperworkSame-day
processing
Safe &
secure
Market-leading robo-advisor
Chatbot, NIC, a pioneering digital insurance assistant.
First in market in the African insurance industry
Chatbot, EVA, allows simple transactions 24/7.
First in market in the SA asset management industry
Geyser telemetry, innovative connected home solution.
First in the SA banking market
Focus on digitising processes in asset management
Enhancing client onboarding experience in wealth &
asset management
Single-policy administration system for life & non-life
insurance
Independently rated a top SA high-net-worth banking
app & 6th-best globally1
App provides international & local consolidated view
of assets & liabilities
37NEDBANK GROUP LIMITED – Annual Results '17ar
2018 guidance
Growth in DHEPS for full-year 2018 more than or equal to growth in nominal GDP +5%, supported by ETI recovery
Average interest-earning banking asset1 growth to increase in line with nominal GDP
growth
NIM slightly above the 2017 level of 3.62%
NII
To increase to within the bottom half of our target range of 60–100 bps (under IFRS 9)
Above mid-single-digit growth
Mid-single-digit growth
CLR
NIR
Expenses
To be positive (ETI associate income reported quarterly in arrear)Associate
income
38NEDBANK GROUP LIMITED – Annual Results '17ar
2020 & medium-to-long-term targets
Metric 2017 vs MLT
Medium-to-long-term
target (MLT) 2018 outlook 1 vs 2017
ROE (excl goodwill) 16.4% ▼5% above COE 3
(≥ 18% by 2020)Increase, but remain below MLT
Diluted HEPS growth 2.4% ▼ ≥ CPI + GDP growth + 5%Grow in line with MLT,
supported by ETI recovery
Credit loss ratio 49 bps ► 60–100 bpsIncrease to within the bottom half
of MLT (under IFRS 9)
NIR-to-expenses ratio 80.7% ▼ > 85%Increase, but
remain below MLT
Efficiency ratio 2 58.6% ▲50–53%
(≤ 53% by 2020)
Decrease, but
remain above MLT
CET 1 CAR
Tier 1 CAR
Total CAR
12.6%
13.4%
15.5%
▲
▲
▲
Basel III basis:
10.5–12.5%
> 12%
> 14%
Within
target range
Dividend cover 1.91 x ► 1.75 to 2.25 timesWithin
target range
1 2018 outlook based on current economic forecasts. | 2 Efficiency ratio includes associate income. | 3 Target to be revised should Nedbank make future acquisitions that
increase goodwill
▲
▲
▲
▲
▲
▲▲
39NEDBANK GROUP LIMITED – Annual Results '17ar
2020 targets – strategy in place to improve financial metrics in
RBB & RoA, while maintaining good returns in CIB & Wealth
Efficiency ratio Return on equity1
Nedbank
2017
Peer
average2
Nedbank
2020 target
Nedbank
2017
Peer
average2
Nedbank
2020 target
Nedbank Group 58.6% 54% ≤ 53% 16.4% 18% ≥ 18%
Corporate &
Investment Banking42.3% 48% ≤ 40% 20.7% 21% ≥ 20%
Retail & Business
Banking63.6% 56% ≤ 58% 19.1% 27% ≥ 20%
Wealth 65.6% 64% ≤ 60% 27.5% 24% ≥ 30%
Rest of Africa3 127.1% 54% ≤ 60% (12.6%) 19% ≥ COE
1 Nedbank ROE target at group excluding goodwill for comparability purposes. | 2 Peer averages based on Dec 2016 for BGA & SBK, June 2017 for FSR | CIB – BGA CIB,
RMB & SBK CIB | RBB – BGA SA RBB, FNB & Wesbank, SBK SA PBB, Wealth – BGA WIMI, RoA – BGA RoA (Barclays Africa acquisition), SBK RoA Legal 3 Rest of Africa includes ETI. COE estimated at >16%.
40NEDBANK GROUP LIMITED – Annual Results '17ar
Nedbank Group – an attractive investment
An improving macroeconomic environment
Supportive global environment
Cyclical improvement in SA growth as confidence
levels improve with structural changes now more likely
Rest of Africa growth ahead of SA
Strong & growing franchises
CIB – strong wholesale franchise (ROE ≥ 20%)
benefiting as business confidence improves
RBB – ongoing revenue growth momentum, CLR
outperformance & efficiencies/ digital to drive
C:I ≤ 58% & ROE ≥ 20% by 2020
Wealth – attractive ROE business (≥ 30% by 2020)
leveraging Nedbank distribution
Rest of Africa
− ETI turnaround underway - share price up 65% in
2017
− Investments made to unlock scale in SADC
subsidiaries
KPIs that support shareholder value creation
2018 DHEPS growth ≥ nominal GDP growth + 5%
ROE (excluding goodwill) ≥ 18% by 2020
Cost to income ≤ 53% by 2020
Strong governance & enterprise wide risk management
Attractive valuation metrics
SA & EM flows likely to continue
Nedbank price to book at the lower end of SA peer
group
Nedbank dividend yield at the higher end of SA peer
group
Improved free-float post unbundling, with any overhang
reduced during transition of OML shareholder base
post OML listing & prior to Nedbank unbundling
Building a more digital, agile & competitive Nedbank
41NEDBANK GROUP LIMITED – Annual Results '17ar
Nedbank Group – attractive relative valuation
Price : earnings1,2 (x)
12.210.8
16.0
13.9
21.7
9.6
NED BGA FSR SBK CPI EMbanks
Price : book1,2 (x) Dividend yield1,2 (%)
Source: 1 I-Net consensus as at 22 Feb 2018. | 2 EM banks include Brazil, Russia, Turkey & SA (Data from JP Morgan). | All data based on 1-year forward forecasts.
1.7 1.6
3.5
2.2
5.6
1.7
NED BGA FSR SBK CPI EMbanks
4.4
5.2
3.5
4.1
1.7
4.3
NED BGA FSR SBK CPI EMbanks
‘3 year forecast
EPS growth1
(CAGR %)7.4 6.3 9.8 10.2 20.0 10.4
42NEDBANK GROUP LIMITED – Annual Results '17ar
5921
5765
4277
11
465
11
787
06 07 08 09 10 11 12 13 14 15 16 17
Nedbank Group in a strong position
16.3
4.5
20.1
5.4
06–08 14–17Wholesale Retail
481584
1 363
08 09 17
(28%)
Global
financial
crisis
Headline earnings (Rm) Loan growth (CAGR %)
NII sensitivity for 1% change in
interest rates (Rm)
CAGR
13.4%
43NEDBANK GROUP LIMITED – Annual Results '17ar
0.45 0.470.70
08 09 H1 1 7
32.0 33.9 36.2
08 09 17
1 Core equity tier 1.
Nedbank Group in a strong position
Number of clients (m) NIR income contribution (%) Defaulted advances (%)
CET 1 ratio (%) Funding tenor (%) Coverage (%)
4.4 4.2
7.9
08 09 17
39.8
42.2
46.6
08 09 17
3.9
5.9
2.7
08 09 17
8.21
9.91
12.6
08 09 17
88% 4.4% (3.2)
2.7%
Sp
ecific
Po
rtfo
lio
60.9 57.9 51.2
19.9 21.021.8
19.2 21.1 27.0
08 09 17
ST
MT
LT
44NEDBANK GROUP LIMITED – Annual Results '17ar
Contact us
Disclaimer
Nedbank Group has acted in good faith and has made every reasonable effort to ensure the accuracy and completeness of the information contained in this
document, including all information that may be defined as 'forward-looking statements' within the meaning of United States securities legislation.
Forward-looking statements may be identified by words such as ‘believe’, 'anticipate', 'expect', 'plan', 'estimate', 'intend', 'project', 'target', 'predict' and 'hope'.
Forward-looking statements are not statements of fact, but statements by the management of Nedbank Group based on its current estimates, projections,
expectations, beliefs and assumptions regarding the group's future performance.
No assurance can be given that forward-looking statements to be correct and undue reliance should not be placed on such statements.
The risks and uncertainties inherent in the forward-looking statements contained in this document include, but are not limited to: changes to IFRS and the
interpretations, applications and practices subject thereto as they apply to past, present and future periods; domestic and international business and market
conditions such as exchange rate and interest rate movements; changes in the domestic and international regulatory and legislative environments; changes to
domestic and international operational, social, economic and political risks; and the effects of both current and future litigation.
Nedbank Group does not undertake to update any forward-looking statements contained in this document and does not assume responsibility for any loss or
damage arising as a result of the reliance by any party thereon, including, but not limited to, loss of earnings, profits, or consequential loss or damage.
Nedbank Group
nedbankgroup.co.za
Nedbank Group Limited
Tel: +27 (0) 11 294 4444
Physical address
135 Rivonia Road
Sandown
2196
South Africa
Nedbank Investor Relations
Head of Investor Relations
Alfred Visagie
Direct tel: +27 (0) 11 295 6249
Cell: +27 (0) 82 855 4692
Email: [email protected]